Reverse Mortgages are designed specifically to cater to the financial needs of senior citizens. This special kind of loan system is referred to as ‘Reverse Mortgage’ because as compared to the conventional property mortgage norms, whereby the borrower has to make monthly payments, here the money-lender/financial organization disburses monetary assistance the loan recipient. An individual above 62 years of age is allowed to obtain a reverse mortgage loan if he owns a debt-free property with a sizable equity. It is also essential for the RM borrower to be using the property as his primary residence in order to avail the benefits of reverse mortgages. This loan scheme is government insured hence all parts of income proceeds generated through this source id absolutely tax-free.
Let us take a look at few crucial factors associated to Reverse Mortgages:
Reverse Mortgage Programs – Currently there are 3 main kinds of Reverse Mortgage Programs namely: Home Equity Conversion Mortgage, Fannie Mae Home Keeper loan and Cash Account loan program
Home Equity Conversion Mortgage (HECM) – HECM program is insured by the Federal Government & is advertised for sale exclusively by FDA (Federal Housing Administration) approved financial lenders. This reverse mortgage program allows the loan recipient to convert his/her home equity into a specific loan amount which is offered through monthly proceeds, lump sum payment or line of credit. The loan amount is determined after careful consideration of the recipient’s age, the current interest rates & the property value. HECM is the most widely chosen reverse mortgage program for senior citizens across United States
Fannie Mae Home Keeper loan – This is the most suitable loan plan for senior citizens who own a sizeable property with an equally higher market value. The loan applicant is not only entitled to receive larger percentage of monetary proceeds but can also sell his/her property and shift to another home during the ongoing loan period. This facility is not provided with any other reverse mortgage programme and can be an incredible financial lead for the retired population
Cash account loan program – Cash account loans are offered by private money-lenders. The positive aspect of this program is that it offers a higher loan amount as compared to others but the biggest drawback associated with it is the fact that several private money-lenders operate unlawfully and therefore unreliable. It becomes very difficult for the elderly to be able to differentiate the ones those are trustworthy and the ones who aren’t. There have been several cases with senior citizens being duped by deceiving money-lenders, thereby forcing them to sell their property for making unreasonable loan repayments before the specified time period.
In order to avoid falling into such traps and educating senior citizens about every intricate aspect of Reverse Mortgage, there are several Reverse Mortgage Counseling centers/agencies which can be easily located in every locality. It is always favorable to arrange a prior meeting with a counselor for analyzing your financial assets and discussing about the potential returns that can be expected by associating with the most suitable reverse mortgage plan. You can find one by getting in touch with the HUD or browsing the internet for the same.